Post Mortem

Economic, humanitarian & human cost of COVID-19

By Nagaland Post | Publish Date: 3/8/2020 12:10:33 PM IST

 The market is shaken globally amidst the coronavirus (COVID-19) outbreak, and many fear an economic crisis like 2008. With the spread of the virus across four continents and WHO upgrading the risk level to “Very High”, global economy in the last week of February lost about $5 trillion. The economy was already in a volatile state because of bilateral trade tensions between two world’s biggest economies China and the US, and it was on its way of recovering even as COVID-19 posed additional pressure with a high level of uncertainty. SARS caused global output loss of $50 billion, while the current outbreak might cost the global economy up to $360 billion. Swiss Bank Credit Suisse cut its global growth forecast by 0.2 percentage points and lowered it to 2.2 percent. The world is strongly interconnected today and so is the economy, hence when any country gets affected, the global economy has to bear the brunt. For instance, fall in demand in China by 1% because of COVID-19 would lead to the low and middle-income countries losing an estimated $4 billion in goods exports and $0.6 billion in tourism. Further, commodity exporters to China like Australia and Brazil could witness a drop of a 0.3 percentage in their growth. As reported by the International Energy Agency, “global oil demand has been hit hard” by COVID-19. The International Civil Aviation Organization (ICAO fears drop of global airline revenue by $4-5 billion in the first quarter. The S&P 500 saw fall of seventh straight day on February 28; Dow and Nasdaq witnessed worst weekly percentage losses and the benchmark index’s biggest weekly dip since the 2008 global financial crisis.

We already have some fair idea of COVID-19 impact on China’s economy. Oxford Economics predicts that the Chinese economy will grow less than 4% in the first quarter. IMF has revised China’s growth forecast down from 6% to 5.6%, which is 5.2% as per Moody. The Shanghai Composite Index fell by 8% on 3 February, biggest fall in four years. 

History shows that such outbreaks, as happened in case of SARS or MERS, get contained within a few months. One of the most important difference between 2003 SARS and COVID-19 is the sustained spread of COVID-19. China’s contribution to global GDP in 2003 was 4%, which is around 17% now. Hence, if the health of China’s economy gets infected, the world economy will suffer. 

Countries that have close economic ties with China or have tourists from China are paying the most. Thailand is now bearing the brunt for having close ties with China vis-à-vis export and tourism, and its 2020 GDP might go down by 0.7%. ICAO has forecast a drop of $1.15 billion and $1.29 billion in revenue by Thailand and Japan respectively in the first quarter due to a drop in Chinese tourists. Research houses predict Japan’s GDP could dip by 0.2% if the outbreak lasts a quarter, or by 0.9% if the outbreak lasts a year. The countries that depend much on the global supply chain, such as Malaysia, will the face challenge of reduced import and export. 

According to ODI, the top countries at risk are Sri Lanka, Vietnam, and Philippines. With dropping in the number of tourists and disturbed supply chain, South Korea and Vietnam might witness a 0.4 percent-point drop in near-term growth. Sub-Saharan Africa can lose up to $4 billion. 

India does not have close economic ties and has limited exposure to China-led supply chain and Chinese tourists (2.7% in 2018), which has kept it largely untouched by the outbreak and adverse impact is estimated to be 0.04% on its GDP. Experts, however, fear that India might witness a larger impact if the virus does not get contained soon. 

The impact has already been observed in manufacturing and exports sectors. India has bilateral trade with China worth $30 Billion – the government is taking necessary steps to protect the economy from the threat. While the October-December quarter saw nearly a 7-year low growth of 4.7%, COVID-19 outbreak could be a big challenge if not managed well. 

On the other hand, there is a huge “humanitarian cost” of this outbreak. The virus is eating up humanitarian fund from two different sides: first, while world economy is losing revenue, there will be less contribution for humanitarian responses (for instance, in India, it’s 2% of the revenue it needs to be donated under CSR rule); second, the money that could have been spent for humanitarian response somewhere in the world, is now being used to respond to this disease outbreak. The preparedness and response plan for COVID-19 for the period February-April 2020 was estimated to be $675 million. UN Central Emergency Fund has released $15 million to fund the global effort to contain the spread of COVID-19. The US Department of Health and Human Services expressed the need of $136 million to combat the epidemic. 

The UK Government has pledged GBP 20 million to develop vaccine for the new coronavirus and other infectious diseases. Further, many humanitarian workers are pooled out from the ongoing response to manage the response to this outbreak, meaning less human resource for ongoing response. A well epidemic-prepared world could have saved seven times the amount that they might have invested in preparedness – which was not done adequately. 

Think about the $360-billion estimated economic loss due to COVID-19 now being invested to prepare the world for epidemics – this amount could have been used much more efficiently to counter the outbreak or a strong system could have prevented the virus from reaching outbreak or epidemic level.

There is unfathomable “human cost” caused by COVID-19 too. The death toll by the disease is already higher (3,198 deaths as of March 4) than SARS (774). We are not sure when the virus will get contained, the death toll will halt and all the infected persons will recover. Secondly, as the hospitals and the health workers get overwhelmed with COVID-19 cases, patients with other diseases suffer more to get adequate care and support. Supply of some of the medicines and public protective equipments are scarce in the market. Livelihoods of hundreds of thousands in China and globally is at stake. Because of the disturbance in the supply chain, even scarcity of food has been reported at certain places. Also, think about being locked down at your home with the fear of the dark devil; imagine the stress, psychological pressure that the people are witnessing. Unfortunately, these huge human costs are ignored and we are not talking much about it.

Anirban Choudhury, 

Sheikh Khairul Rahaman

Launched on December 3,1990. Nagaland Post is the first and highest circulated newspaper of Nagaland state. Nagaland Post is also the first newspaper in Nagaland to be published in multi-colour.

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